The digital transformation of SMEs

Small and medium enterprises (SMEs) are considered the lifeblood of any nation’s economy and rightly so because of their high share of employment and value addition.

In Pakistan, there are about 3.8 million SMEs which according to the Small and Medium Enterprises Development Authority, constitute around 80 to 90 per cent of the country’s private enterprises from industrial, services and trade sectors, employing almost 80pc of the non-agriculture labour force and contributing over 30pc to GDP.

Recognising this potential, the government of Pakistan has been taking some exemplary measures to draw on the maximum potential of this sector such as the ones laid out in SME Policy 2021-25 which include generous tax reductions and big incentives for both men and women entrepreneurs. The SME Development Fund currently under process will extend grants for market access, training and business development. The recent expansion in Pakistan’s SMEs sector is also a testament to the favourable business environment in the country.

According to a study conducted in India by Google and KPMG, the revenue and profit of digital SMEs grow twice as fast as their offline counterparts and they can hire up to five times the number of employees

However, the last year with the pandemic presented one more area that needs work: digitalisation. Today, no matter what the size of the company, its location or its line of business, technology is an ally for the success of all companies. Now, digital transformation is no longer a “nice to have”, but a “must have” that is crucial to the survival of a business.

According to a study conducted in India by Google and KPMG, the revenue and profit of digital SMEs grow twice as fast as their offline counterparts. The introduction of digital platforms enables them to discover new market opportunities and drive overall growth. This is not only reflected in the company’s profits, but compared with offline employees, they can hire up to five times the number of employees.

Nevertheless, every digital transformation strategy looks different since every company has unique needs and pursues its own goals. Therefore, the foundation of any solid transformation is a complete document of the company’s needs. By pre-modelling business processes, companies can prioritise specific issues and understand what specific elements are hindering a smooth operation. For example, it is important to first determine which activities are time-consuming and can be automated, or which data should be accessible to improve customer experience.

The common misconception that technology is only accessible to large companies with big budgets is misplaced. SMEs can also leverage technology to drive better efficiencies, innovation and growth. In fact, compared to larger companies, SMEs are well placed to take advantage of technology. Because of their size, SMEs are more agile and are able to make decisions faster and respond to changing market conditions quicker.

An automated system helps companies manage the countless processes that make the businesses function effectively, such as finance, human resources, supply chain, procurement, and customer relationship management to name a few. Digitalisation not only enhances a company’s ongoing operations but also helps them unlock the value of their data to optimise decision making and support continued innovation in the future.

It adds visibility across the entire company, preventing silos, streamlining processes and making the work manageable with intelligent capabilities.

Digital transformation is a path that all SMEs must begin to follow in order to keep up with their consumers, so it is better to start earlier, even with a small step. With Pakistan’s IT strength growing exponentially and the nationwide digital Pakistan initiative progressing rapidly, it is a good omen for businesses to benefit from this changing dynamic and bring intelligence to their operations to efficiently serve their consumers’ changing needs. Crossing the digital divide can help small businesses have a big reach with better business gains than ever.

The writer is the managing director of SAP Pakistan

Published in Dawn, The Business and Finance Weekly, December 20th, 2021


Donovan Larsen

Donovan is a columnist and associate editor at the Dark News. He has written on everything from the politics to diversity issues in the workplace.

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